CENTRE RAISES DEARNESS ALLOWANCE TO 63%: 1.17 CRORE EMPLOYEES AND PENSIONERS SET TO BENEFIT FROM 3% HIKE
October 28, 2026
NEW DELHI, OCTOBER 28, 2026 — The Union Cabinet on Wednesday approved a three-percentage-point increase in Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners, raising the rate from 60 per cent to 63 per cent of basic pay and pension, respectively. The revised rates will take effect retrospectively from July 1, 2026, providing eligible beneficiaries with arrears for the intervening period.
The decision, announced by Union Minister for Information and Broadcasting Ashwini Vaishnaw, is expected to benefit approximately 48.54 lakh central government employees and 68.71 lakh pensioners. According to the government, the combined annual financial impact of the revision will be ₹10,016.10 crore.
The increase comes ahead of Diwali and forms part of the Centre's periodic adjustments intended to help employees and pensioners cope with rising living costs.
DA RISES FROM 60% TO 63%
The latest revision raises the allowance by three percentage points, rather than by three per cent of the existing allowance amount. For employees, DA is calculated as a percentage of basic salary; for pensioners, DR is calculated as a percentage of the applicable basic pension.
For example, an employee with a basic monthly salary of ₹30,000 would receive ₹18,900 as DA at the revised rate of 63 per cent, compared with ₹18,000 at the previous rate of 60 per cent. This represents an increase of ₹900 per month, before accounting for other salary components or deductions.
Similarly, a pensioner receiving a basic monthly pension of ₹20,000 would receive ₹12,600 as DR at 63 per cent, compared with ₹12,000 at the previous rate. The difference would amount to ₹600 per month.
These examples illustrate the effect of the revised percentage on basic pay and pension; actual salary and pension payments depend on individual service and pension records.
RETROSPECTIVE EFFECT FROM JULY 1
Because the revised rates apply from July 1, 2026, eligible employees and pensioners will be entitled to the difference between the previous and revised rates for the applicable period.
The arrears will depend on the beneficiary's basic pay or pension and the period for which the revised rate applies. The precise payment date and disbursement arrangements will be determined through the government's implementation instructions.
The retrospective effective date means the financial benefit is not limited to payments made after the Cabinet announcement. Eligible beneficiaries should receive the applicable difference for the period beginning July 1, subject to the relevant rules.
WHY DEARNESS ALLOWANCE MATTERS
Dearness Allowance is intended to cushion government employees against the erosion of purchasing power caused by inflation. Dearness Relief serves a corresponding purpose for pensioners, many of whom depend on fixed monthly incomes to meet household expenditure, healthcare costs and other essential expenses.
The Centre generally revises DA and DR twice a year, with adjustments commonly taking effect in January and July. The calculation follows an established formula linked to inflation data and the recommendations of the Seventh Central Pay Commission.
Although an increase in DA and DR improves nominal monthly income, its real effect depends on changes in the prices of food, housing, transport, healthcare and other necessities. The adjustment is designed to offset inflationary pressure rather than guarantee that every household's additional expenses will be fully covered.
GOVERNMENT'S FINANCIAL COMMITMENT
The estimated annual cost of ₹10,016.10 crore represents the combined expenditure arising from the increase in allowances for serving employees and pensioners.
The decision covers a combined population of approximately 1.17 crore beneficiaries, including 48.54 lakh employees and 68.71 lakh pensioners. It therefore has implications not only for individual household budgets but also for the government's recurring expenditure.
The additional payments will increase disposable income for eligible recipients, although the overall effect on consumption and savings will vary according to household circumstances.
WHAT BENEFICIARIES SHOULD EXPECT
Central government employees should look for the revised DA rate in their salary calculations, while pensioners should check the corresponding DR adjustment in their pension payments. Those eligible for arrears should verify the applicable period and amount through their department, pension-disbursing bank or relevant pension authority.
The Cabinet's approval establishes the revised rate and its effective date. Implementation arrangements will determine how the revised payments and arrears are processed.
For millions of employees and pensioners, the announcement offers an additional inflation-linked payment at a time when household expenses remain an important concern. The extent of the benefit for each recipient will depend on their basic salary or pension and the timing of the revised disbursement.
